1 

### STATE OF WEST VIRGINIA

SUPREME COURT OF APPEALS

Teddy Atkins II, Respondent Below, Petitioner

vs.) No. 18-0084 (Kanawha County 16-D-361)

Angela Atkins, Petitioner Below, Respondent



### MEMORANDUM DECISION

Petitioner Teddy Atkins II, by counsel Tim C. Carrico, appeals th e Circuit Court of Kanawha County’s December 15, 2017, order denying hi s petition for appeal from a family court order on equitable distribution following the pa rties’ divorce. Respondent Angela Atkins, by counsel Mark A. Swartz, filed a response in suppor t of the circuit court’s order. Petitioner filed a reply. On appeal, petitioner argues that the lower courts erred in determining that two businesses, Angela’s Salon LTD (“Angela’s Salon”) and Rare Form LLC (“Rare Form”), were not marital assets subject to equitable distribution.

This Court has considered the parties’ briefs and the record on appeal. The facts and legal arguments are adequately presented, and the deci sional process would not be significantly aided by oral argument. Upon consideration of the st andard of review, the briefs, and the record presented, the Court finds no substantial questi on of law and no prejudicial error. For these reasons, a memorandum decision affirming the orde r of the circuit cour t is appropriate under Rule 21 of the Rules of Appellate Procedure.

On October 10, 2009, the parties married. 1 Respondent initiated divorce proceedings on March 11, 2016, and by “Agreed Bifurcated Divor ce Order,” the parties were divorced on December 22, 2016. The issue of equitable distributi on of the marital estate was bifurcated from the divorce, however, and considered at a fina l hearing before the family court on June 7, 2017. At this hearing, both par ties testified to their involvement with and purported inte rest in the two

businesses that are the s ubject of this appeal.

Respondent explained that she incorporated Angela’s Salo n in 2006, more than three years prior to the partie s’ marriage. At the time of incorpor ation, all shares in the salon were issued to respondent, and she continuously owned those shares th roughout the marriage.

1 No children were born of this marriage. 

### FILED
January 14, 2019

EDYTHE NASH GAISER, CLERK

SUPREME COURT OF APPEALS

OF WEST VIRGINIA2 Respondent was diagnosed with leukemia in 2011, and became very ill. 2 Following respondent’s diagnosis, petitioner obtained his cosmetology licen se and began working at Angela’s Salon. Petitioner received wages from the salon for hi s services. Additionally , petitioner signed tax returns as sole shareholder during respondent’s illness, but respondent made clear that she did

not transfer stock in th e business to petitioner:

Q. Okay. At any time during your ma rriage, up from the start of your marriage to today, did you sign anyt hing, a stock certificate, an assignment, a bill of sale, any kind of document transferring any bit of your stock to [petitioner]?

A. No.

Petitioner confirmed that th ere was no stock transfer:

Q. . . . Can you show me a piece of pa per, today, that [respondent] signed where she transferred stock in Angela’s [S]alon to you?

A. I cannot[.]

Respondent also testified that she formed Ra re Form in July of 2010, approximately one year after the parties ma rried but prior to her ca ncer diagnosis, in orde r to purchase the building out of which Angela’s Salon opera tes. Respondent was Rare Form’s sole member at the time of its formation. To purchase the building and cap italize Rare Form, respondent, who was married prior to her marriage to petitione r, used the proceeds from the sale of her prior marital home. Specifically, respondent received $62,626.27 following the sale of this prior marital home. She used $29,533.52 to close on the building owned by Rare Form and used most of the remaining funds to make improvements to the building. 3 Petitioner invested no funds into Rare Form.

At the time the Rare Form building was pur chased, respondent sign ed a “Declaration of Limited Liability Company or Limited Liability Partnership and Authority to Borrow” form as Rare Form’s member, and she is listed on that document as owning 100% of the company.

Petitioner’s name is not on this form or the closing documents, includi ng the promissory note. Petitioner did, however, personall y guarantee the loan to Rare Form. Additionally , the parties refinanced the loan in 2015, and each signed th e refinancing documents as members of Rare Form. Respondent indicated that she added peti tioner as a member of Rare Form in 2011 following her diagnosis, but she removed him in 2016 at the time of the parties’ separation.

2 In fact, respondent was determined to be permanently disabled in 2011. She received Social Security Administration disability paym ents until she returned to work following the parties’ divorce.

3 Technically, the closing on her prior marita l home occurred approximately two months after the closing on the Rare Form building. Conse quently, respondent drew on a line of credit to provide cash at closing on the Rare Form build ing, and then repaid that amount following closing on her prior marital home.3 As with her testimony regarding Angela’s Sa lon, respondent confirmed that she did not transfer equity in Rare Form to petitioner:

Q. Did you sign any kind of assignment, tr ansfer or deed or anything of that nature transferring any piece of your e quity contribution to Rare Form or interest to [petitioner]?

A. No.

Petitioner acknowledged the same:

Q. . . . Do you have a piece of paper, as we sit here today, signed by my client that shows that she transferred equity or ownership in Rare Form to you?

A. Other than the tax forms, no. 4

Following this final hearing, the family cour t concluded that the two businesses belonged to respondent and, therefore, we re not marital property subject to equitable distribution. The family court entered its final divorce orde r memorializing this ruling on October 20, 2017. Petitioner appealed this orde r to the circuit court. On December 15, 2017, the circuit court entered an order denying petitione r’s appeal. It is from this order that petitioner appeals.

In reviewing a final order entered by a circuit court judge upon a review of, or upon a refusal to review, a final orde r of a family court judge, we review the findings of fact made by the circuit court judge under the clearly erroneous standard, and the application of law to the facts under an abuse of discretion standard. We review questions of law de novo

.

Syl., Carr v. Hancock , 216 W.Va. 474, 607 S.E.2d 803 (2004).

On appeal, petitioner argues that the circuit c ourt erred in concluding that Angela’s Salon and Rare Form were respondent’s sepa rate property, no t marital assets. 5 With respect to Angela’s Salon, petitioner argues respondent transferred that property to the marriage as a gift. In support of this argument, petitioner notes that the tax retu rns filed for the business list him as its sole

4 Petitioner’s assertion is predicated on the fact that the IRS Form 1099 regarding rent paid by Angela’s Salon was issued to petitioner fo r 2014. It also appears that the parties listed the rental income on their jointly filed individual in come tax returns; however, petitioner’s rental units, classified as his separate property, are also listed. Responde nt made no claim to petitioner’s rental property.

5 These businesses depreciated in value over the course of the parties’ marriage; accordingly, petitioner is not claiming entitlement to any increased value in the businesses. See W.Va. Code § 48-1-233(2).4 shareholder, as do bank refinancing documents. Pe titioner also claims that the parties’ conductreflects the transfer. Namely, petitioner claims it is undisputed that he managed the salon’s dayto-day operations during responde nt’s illness from approximately February 2011 through 2015.

West Virginia Code § 48-1-233 defines “mar ital property,” generall y, as “[a]ll property and earnings acquired by either spouse during a marriage[.]” Certain property is excluded from this definition, including “[p]roperty acquired by a person before marriage[.]” Id. § 48-1-237(1). It is undisputed that respondent incorporated Angela’s Salon more than three years prior to the parties’ marriage.

Moreover, petitioner failed to establish that respondent transferred A ngela’s Salon to the marital estate as a gift. In Syllabus Point 4 of Whiting v. Whiting , we held that

[w]here, during the course of the marri age, one spouse tran sfers title to his or her separate property into the joint names of both spouses, a presumption that the transferring spouse intended to make a gi ft of the property to the marital estate is consistent with the principles underl ying our equitable dist ribution statute.

183 W.Va. 451, 453, 396 S.E.2d 413, 415 (1990). Critical ly, petitioner has no evidence th at title to Angela’s Salon was transferre d to him, and he ci tes to no law supporti ng his contention that identifying himself as a shareholder or president of Angela’s Salon on the tax documents for that entity effectively transferred title to him. Rath er, the uncontradicted evidence adduced below was that respondent, at all times, po ssessed all stock in the business. We, therefore, find no error in

the lower courts’ conclusion that Angela’s Salon is not marital property subject to equitable

distribution. 6

With respect to Rare Form, we begin by no ting that “[p]roperty acquired by a person during marriage in exchange for separate property which was acquired before the marriage” also constitutes “separate property,” and not “mar ital property.” W.Va. Code § 48-1-237(2). Although respondent formed Rare Form following the partie s’ marriage, she capitalized it with funds obtained through the sale of her prior marital home . In other words, Rare Form was acquired in exchange for separate property. Petitioner bases his ownership cl aim on the fact that he was a guarantor of the original loan with which the property was purchased and he signed refinancing documents in 2015. As with his previous claim, petitioner cites to no law that supports his position that guaranteeing a loan or signing loan documents, alone, transforms a separately acquired asset into marital property. Rather, th e evidence showed that respondent’s separate property was used to close on and make upgrades to the building.

6 During the divorce proceedings, petitioner re moved personal property from Angela’s Salon valued at $31,196. The family court direct ed that petitioner repay this amount to respondent. Petitioner asserts that he should have been directed to pay only 50% of the value of the personal property because Ange la’s Salon is a marital asse t. Having found that Angela’s Salon is respondent’s separate property, there is no basis for disturbing the family court’s directive regarding repayment of this amount.5 Petitioner also states that “t he 1099 regarding income for re nt paid by [Angela’s] Salon to Rare Form . . . was issued as recent[ly] as 2014 ” to him and not to respondent. Petitioner claims this amounts to a commingling of separate and marital property, which tr ansforms Rare Form into marital property. In support, petitioner cites Hamstead v. Hamstead , wherein we held that

[w]hen an individual during marriag e has property which is separate property within the meaning of W.Va. Code , 48-2-1(f) [now West Virginia Code § 48-1-237], and then exchanges that propert y for other property which is titled in his name alone, and which is not comingled with marital property, then that other property acquired as a resu lt of the exchange is it self separate property.

184 W.Va. 272, 273, 400 S.E.2d 280, 281, Syl. Pt. 3 (1990).

This argument ignores the f act that Angela’s Salon – re spondent’s separate property – paid rent to Rare Form, which, in turn, was used to pay the building’s mortgage. Neither marital funds nor petitioner’s sepa rate funds were used to pay rent or to satisfy the mortgage obligation. Accordingly, petitioner did not demonstrate that respondent commingled funds such that Rare Form could fairly be classified as marita l property subject to e quitable distribution.

For the foregoing reasons, the circuit court’s December 15, 2017, order denying petitioner’s petition for app eal is hereby affirmed.

Affirmed.

ISSUED: January 14, 2019

CONCURRED IN BY:

Chief Justice Elizabeth D. Walker Justice Margaret L. Workman

Justice Tim Armstead

Justice Evan H. Jenkins

Justice John A. Hutchison